The PGA bringing live sports back to the fore did little to help market sentiment, which landed in the rough this week. U.S. large-cap stocks fell nearly 5%, with small-cap and value fairing even worse. No single event drove the move; instead, it was a narrative shaped by a culmination of factors, including:
- Fear that the speed of the stock market recovery may have outpaced the outlook for the economy.
- Some states that were early in reopening are seeing significant growth in COVID-19 cases.
- The Federal Reserve failed to provide investors with a comforting near- and medium-term outlook for the economy.
- The Senate and White House are showing a lack of urgency to work on the next stimulus bill.
Despite the sharp rally of the past eleven weeks, the road to recovery was never likely to be smooth. Such setbacks are expected. Will the sell-off continues next week, or will stocks return to their winning ways? Unless you have a crystal ball, these are the wrong questions. We focus on science, not speculation, and believe the three most important questions an investor can ask in uncertain times are:
- Is my financial plan on track?
- Is my asset allocation aligned with my risk profile?
- Is my investment manager sticking to their process?
A sound process is critical. At Strategic, ours is evidence-driven, based on our nine Guiding Principles. See our website for details.
Headlines This Week
- The Federal Reserve said Wednesday it is planning to keep its benchmark interest rates near zero through 2022.
- Chairman Jerome Powell reiterated the Central Bank would do whatever it takes to bring the economy back to growth.
- Preliminary Michigan Consumer Sentiment Index is showing some positive signs of recovery.
- Americans are continuing to return to work. Data shows that job growth may be outpacing unemployment claims.
- Weekly continuing claims dropped by 339,000, but new claims were over 1.5 Million.
- Some states are seeing rising hospitalizations and starting to run into ICU bed capacity issues.
- Some fear that the U.S. may have reopened too quickly, and many people are not wearing masks and obeying social distancing efforts.
- European Union officials also fear a second wave after mass protests over the last days.
The Week Ahead
A relatively quiet week in the U.S. as attention is likely to remain around the ramifications of reopening.
- Initial Jobless Claims released weekly is in the spotlight.
- The consensus is around 1.3 million new jobless claims next week.
- How many continuing claims filed will also be paramount.
- Fed Chairman Powell is set to testify before Congress next Tuesday and Wednesday.
- After some recent comments that provided a pessimistic outlook, the market may hope to receive a more measured response from Powell this time around.
Across the pond, England and the European Union have pressing matters to address surrounding their futures.
- UK PM Boris Johnson and EU Commission President Ursula von der Leyen are set to meet next week to attempt to resolve the impasse that has plagued the Brexit talks in recent months.
- The Bank of England is set to make additional announcements in its fight against a COVID-19-induced recession next week.
- Experts predict an extra 100 billion pounds to be made available to fund the Bank’s QE program.
- The European Commission is preparing to decide on its own 250 billion Euro stimulus package.
The PGA is back.
- The Charles Schwab Challenge in Fort Worth, Texas, kicked off Thursday and will give sports fans a much-needed dose of live sports.
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